We have higher acquisition targets in India: Sanjeev Gupta of Liberty House

In a Q&A, the executive chairman of the group dwells on the initial frustrations while entering India, and the road ahead

Liberty House Group entered India by acquiring Adhunik and Zion just before the Covid pandemic, and after having examined many assets under the Insolvency and Bankruptcy Code (IBC). In an interview, the Group's Executive Chairman, Sanjeev Gupta, tells Ishita Ayan Dutt that there have been frustrations along the way but India is definitely a place where the group would like to grow its business. Edited excerpts:

You set foot in India with Adhunik and Zion acquisitions just before Covid. How has the pandemic impacted your plans for the companies?

It has delayed us, but we have still used this period. The operations had been shut for a long time, so a lot of work was needed. But we would have started production by now, so we are probably behind our plans by two to three months. We are hoping to start in October. It would, however, depend on the Covid situation.

You are looking at reducing cost by 30 per cent globally, what would that mean for India operations?

Actually, it's not cost reduction, what we are looking at, it is 20-30 per cent efficiency gains. This comes in a multiple range of initiatives. For instance, in one of our operations, there is no cost reduction, but they have changed the operating module based on the current volumes and demand which means the raw material mix has shifted. So a lot of adjustments were made to derive this 20-30 per cent efficiency gain.

In other places, there is some headcount reduction where we feel there has been a permanent drop in demand. The biggest point is, we are looking at how we work. So we are looking at our budgets on travel, or whether we need so much office space, especially since the new world has taught us that a lot of the work can actually be done digitally and using communication technology. Those are the reduces that are happening. 

Could you chart out the road map for Adhunik and Zion?

There are various parts within the business - rolling mills, DRI plants, power plants, ferro alloy plants, induction furnaces, arc furnaces. The first target is to get everything restarted. That would be from October onwards to over the next three to six months. Then there are many gaps in capacities. The rolling mill capacity, for instance, is less than the melting capacity, which means we will end up selling more semis to begin with. So we will start filling up those gaps. A lot of capital expenditure is required to bring it to uniformity so that the plant can produce 0.5 million tonne which is its current capacity. That perhaps is the target for all of next year.

 

So, March 21 is the target to get the rhythm going and March 2022 will be the target to get the full production rate. Then we have expansion plans. We believe the plant can be taken up to a million tonnes but those plans are not yet finalised. 

When you started looking at India, you were looking at much a bigger play than Adhunik. So are you currently scouting for any other assets?

We will examine all assets that come up in our sector in every business, whether it's steel, aluminium or energy. But that doesn't mean they will go through. Having said that, our ambition for India was greater, we didn't quite achieve those targets. But now that we have started in earnest with Adhunik, we will definitely look to expand. India will be major hub, as it is in the UK, Europe, America and Australia. That means we will have higher targets and probably down the road there will be other acquisitions.

What would say about your experience with the Insolvency and Bankruptcy Code (IBC)?

It's definitely been a learning curve for everybody. But these are changes that are happening in generations. So it's but natural that there will be teething troubles. There have been frustrations along the way for us but we are still very confident that India is a place where we would like to grow our business.

Indian bankers had shown scepticism. Have you reached out to them since?

We have. Adhunik's completion was a great endorsement for everybody. We had come in with great ambitions but since we were falling behind, Adhunik was a great endorsement that we are committed to India. That has been a good beginning with the financial community. 

But we have not taken any funding, the business has been acquired with equity. But we are in India, we have to grow and we need the financial community to understand and support us.

In China, depleting inventories are pushing up prices. What is the outlook on steel prices?

China is definitely providing a floor because unlike the rest of the world, steel demand there is doing quite well. In the rest of the world, we expect some headwinds for the next 12-18 months which is part of the reason why we have initiated the efficiency drive in all our plants. Overall, we are talking about a 20 per cent demand drop as a minimum expectation outside of China.

You were looking at adopting Greensteel at Adhunik. What kind of changes would be required?

Adhunik has electric arc furnaces and induction furnaces. So it can recycle. Our strategy globally is to recycle more, especially in countries where there is availability of scrap. And the other is to move towards gas and eventually towards hydrogen as a source of making steel rather than coal. That's strategy we will adopt in every place.